Category: Benefits

Benefits / Tax

The Special Timing Rule for Taxation of Nonqualified Deferred Compensation

For an employee who is a U.S. taxpayer, both the employer and the employee are liable for a portion of Social Security taxes and Medicare taxes (collectively referred to as “FICA” taxes) on the employee’s compensation. Employers are liable for withholding and remitting both the employer and the employee portions of FICA taxes, which typically...

Benefits / Tax

Canadian Compensation Arrangements – When Do I Need U.S. Counsel?

Imagine a Canadian company adopts a deferred share unit plan (DSU Plan) for its directors.  At the time the plan is adopted, the company does not have the plan reviewed by U.S. counsel, because none of their directors reside in the U.S.  It is not until several years later that the company learns that one...

Benefits / Tax

Reviewing Compensation Arrangements for Employees Subject to U.S. Income Tax Before Year-End Could Avoid Costly Tax Penalties

We have written about this in the past [here], but the message bears repeating each year. It is easy to overlook that employment agreements, change-in-control agreements, and severance agreements with U.S. taxpayers frequently contain provisions that subject them to U.S. Internal Revenue Code Section 409A (“Section 409A”), and failure to comply can result in onerous tax...

Benefits / Securities

A Reminder to Track Rule 701 Equity Awards to U.S. Residents

Canadian companies relying on Rule 701 under the Securities Act of 1933 to exempt their U.S. awards of stock options and other types of compensatory equity (such as RSUs and PSUs), need to track on an ongoing basis the amount of grants being made in the United States. If they anticipate that the aggregate dollar...

Benefits / Securities

Common U.S. Securities Problems with Canadian Stock-Based Compensation Plans

We are frequently asked to review Canadian companies’ stock option, restricted share unit (RSU), performance share unit (PSU), deferred share unit (DSU), and other stock-based compensation plans for U.S. securities law purposes, because awards are expected to be made to U.S. residents. For companies that are cross-listed and file reports with the Securities and Exchange...

Benefits / Tax

Common U.S. Tax Withholding and Reporting Errors with Respect to Certain RSUs

A Canadian company (the employer) historically has not issued equity-based awards to employees of its U.S. subsidiaries, but it now is considering doing so. Past posts have addressed potential U.S. income tax pitfalls and the need for careful review of the plan and award agreements prior to the grant of restricted stock units (RSUs) and...

Benefits / Securities / Tax

Unexpected Risks of Early Exercise Incentive Stock Options

Canadian companies and their outside counsel occasionally ask about the ability to grant early exercise incentive stock options (“ISOs”) to limit the impact of the U.S. alternative minimum tax (“AMT”) to their U.S. employees. However, due to fairly counterintuitive U.S. federal tax regulations, structuring options in this manner may expose optionees to negative tax consequences...